Don’t forget the non-residence option

Although it is rather an extreme measure, one way for individuals to limit their tax exposure can be for them to go non-resident. As a general rule non UK resident individuals do not have a UK tax exposure to UK source dividends or UK capital gains (with the notable exception of residential properties).

Although the statutory non residence test is quite complicated it has the benefit of being much more objective than the rules that preceded it. See the link below to the Forbes Dawson residence test flowchart for more detailed guidance. This shows that it is feasible in certain circumstances to meet the non-residence conditions and still spend 120 days in the UK (although this will usually need to be lower).

www.forbesdawson.co.uk/StatutoryResidenceTestFlowchart.pdf

Five Year Rule

In general an individual will have to leave the UK for five full tax years to avoid him being assessable to income and gains when he returns to the UK.

Where to go?

The trick is to go somewhere with a favourable tax regime. There is a whole menu of jurisdictions which offer attractive ‘deals’ for individuals looking for a friendly home. To take one example Switzerland offers a lump sum system of taxation which can be attractive for individuals who anticipate high income and gains.

Final word

Often this course of action will not be appropriate because people want to stay in the UK, but it should be discussed as an option. This can be particularly relevant for retiring couples who may be planning to move to sunnier climes in any event.

 

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